The last week before the finalization of a new state budget has not always been a happy time for New Jersey businesses in recent years.
But with the FY24 budget deadline of June 30 fast approaching, the business community may have some positives to appreciate – despite legitimate questions about the overall sustainability of the budget.
“This is a time of the year where we’ve typically been back on our heels with tax increases and bad bills to wrap up budget season,” NJBIA Chief Government Affairs Officer Christopher Emigholz said.
“While we can’t say everything is perfect, we can definitely say that things have greatly improved, and the Legislature and the Murphy administration have heard many of our concerns and are appropriately acting upon them through legislation.”
Here are how NJBIA’s top priorities are looking with the Legislature’s summer recess looming:
Sunsetting on Temporary CBT Surtax
Even with reduced tax revenues, a commitment by Democratic leadership to a new and costly StayNJ senior tax rebate program and the daily, fact-free whining of progressive groups, the scheduled end of the 2.5% surtax appears to be a go.
Both Gov. Phil Murphy and an overwhelming majority of the Legislature are in agreement that the temporary surtax should expire. In fact, it would have taken a new piece of legislation to extend the surtax, and no one took on the cause during budget season.
New Jersey’s current CBT rate of 11.5% is by far the highest in the nation and its rate will still be the fourth highest at 9.0% after the scheduled sunset at the end of the year.
“Our policymakers seem to understand that New Jersey is an outlier on business taxes, and being an outlier with CBT is not a good place for New Jersey to be when other states are reducing their rates and becoming more competitive,” Emigholz said.
“Sometimes the best moves are the ones you don’t make. And letting that surtax expire is a great positive not only for New Jersey’s biggest employers, but also for employees who stand to benefit with higher wages and more opportunities.”
Corporate Taxes More Competitive?
Legislation (S-3737) that would make New Jersey’s corporate tax policies more competitive with other states by changing the way global intangible low-taxed income (GILTI) is treated is likely to get full votes by both houses next week.
Very few states tax income earned abroad by U.S.-controlled corporations as aggressively as New Jersey. New Jersey is an outlier by allowing corporations to only deduct 50% of GILTI from their tax base, but this bill would reform New Jersey’s tax code to instead exclude 95% of GILTI income.
“Of our neighbors, New York and Connecticut only tax 5% of it, while Pennsylvania does not tax GILTI at all,” Emigholz said. “Being a GILTI outlier harms our competitiveness with multi–national corporations and discourages their investments in New Jersey.
“This is complex legislation that we have worked with Treasury on since last summer. It is not a rushed bill. It is a compromise bill that is revenue-neutral and will benefit the state. New Jersey is fortunate to have many multi–national corporations located here and creating jobs.”
Making State Finances More Understandable
Speaking of New Jersey’s budget, a bill crafted by NJBIA and the New Jersey Society of CPAs is scheduled for a vote by the Senate this coming week.
In short, bill S-1884, will require the state auditor to publish a user-friendly report summarizing the typically voluminous and technical annual New Jersey Comprehensive Financial Report.
The bill unanimously passed the full Assembly last year.
“This is really a way to put New Jersey’s economic circumstances into easier context by comparing it to fiscal conditions in other states,” Emigholz said. “Anything that can bring more light to the state’s budget process, more transparency and more engagement from the general public is just a good government bill.”
Bill to Stop NY from Taxing NJ Remote Workers
Also, up for a Senate vote, an-NJBIA supported bill (S-3198) that attempts to prevent New York from taxing New Jersey workers who have stopped commuting into New York City or other parts of the Empire State since the pandemic.
“We have a lot of people that have not worked in Manhattan for a day in years and yet they’re paying all of their income taxes to New York State,” Emigholz said. “And New Jersey is not seeing any of that.
“There are estimates that it could be billions of dollars that New Jersey is losing out on. And that can go toward a lot of important things that we talk about in the scope of the budget process.”
Advancing ‘Manufacturing in Higher Education Act’
Another bill that could get to Gov. Murphy’s desk this coming week is a bipartisan bill that would create a more comprehensive and multifaceted plan to improve the quality of New Jersey’s manufacturing workforce.
Emigholz said the “Manufacturing in Higher Education Act” (A-2014/S-659) is a top priority for the Manufacturing Counts partnership between NJBIA and NJMEP.
“This bill is pro-manufacturing and pro-employee and will help address workforce challenges the manufacturing sector has faced, even before the pandemic,” he said.
Among the bill’s provisions:
- Aligning government, education and training providers to manufacturing pathways offered through the New Jersey Community College Consortium’s new Pathways to Career Opportunities
- Establishing a $10 million grant program to support manufacturing workforce development programs for education and training providers and promoting manufacturing career awareness
- Creating a manufacturing liaison in the New Jersey Business Action Center Directing state government to be more responsive to the needs of the manufacturing industry
- Establishing a Manufacturing Council in the State Employment Training Commission
The Department of Consumer Affairs has to license and regulate more than 720,000 individuals and businesses and they collect millions of dollars in licensure fees to do so.
However, that money is diverted to other parts of the state budget, which leaves DCA without the resources to modernize its operations and reduce some huge backlogs and licensure delays.
But bill A-5283, which may get a vote next week, requires DCA to identify the national average time for approving credential applications, implement best practices to effectively process applications, and actually reinvest its licensure fees into DCA so it can be more efficient.
Said NJBIA Vice President of Government Affairs Althea D. Ford: “With the goal of efficiency and the available resources to get the job done, this upgrade is both undeniable and realistically attainable through this legislation.”
Furthering Angel Investment
An NJBIA-supported bill that would greatly increase tax credits for investments made in certain technology business ventures does not yet have a vote scheduled for this coming week, but hope springs eternal.
According to NJBIA Director of Economic Policy Research Kyle Sullender, the “New Jersey Angel Investor Tax Credit Act” could boost the state’s ability to attract much-needed capital for innovative businesses.
“I’m happy to say based on the research that we’ve done, this would take our Angel Investor Tax Credit program from being amongst many to really being a leader in the country as one of the most competitive programs you can find out there,” Sullender said.
One of many recommendations in NJBIA’s Indicators of Innovation report, including the latest version last August, was to amend the current Angel Investor Tax Credit to provide additional incentives for investing in smaller, high-growth companies in New Jersey.